More on oil

Bear with me here as I obsess about oil. Just look at these May JPT (pdf) numbers: World Oil Supply and Demand   Million barrels per day   2004  2005        Quarter   4th  1st 2nd  3rd  4th   Supply 84.04 83.95 84.52  83.81  84.03   Demand 84.42 83.92 82.27 83.04 85.24 What's wrong with supply, you ...

Bear with me here as I obsess about oil. Just look at these May JPT (pdf) numbers:

Bear with me here as I obsess about oil. Just look at these May JPT (pdf) numbers:

World Oil Supply and Demand 
 Million barrels per day
  2004  2005       
Quarter   4th  1st 2nd  3rd  4th 
 Supply 84.04 83.95 84.52  83.81  84.03 
 Demand 84.42 83.92 82.27 83.04 85.24

What's wrong with supply, you ask? Jessica Holzer Forbes provides good answers. This is an important observation about the oil majors' investment in new fields and technology to enhance recovery rates from existing fields:

The industry protests that it has poured $106 billion into new production already this year. But though that may sound like a lot, it isn't even enough to replace the depletion of current oil fields as well as cover the wear and tear on equipment and machinery.

Read the whole piece. OK, one more excerpt that explains why oil companies aren't investing more:

"My guess is virtually 90% of the oil industry is assuming that $70 oil is not going to last more than a few years," according to Adam Sieminski, the chief energy economist at Deutsche Bank. He guesses that most oil companies are projecting crude will fetch $40 a barrel plus inflation over the long-term.

On that score, the oil companies appear to be virtually alone. Wall Street continues churning out predictions of $100 oil. Hedge fund managers are pouring millions into oil futures. And peak oil theorists, who argue that humans have produced nearly half the oil that there is to produce, and that therefore prices will shoot up enough to bring economic growth to a halt, are enjoying their heyday.

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